Blizzard Seen Having Little Financial Effect on Airlines

Courtney Reagan

Friday, 31 Dec 2010 | 3:20 PM ETCNBC.com

SHARES

The blizzard that nailed the Northeast this week disrupted air travel smack dab in the middle of the holiday season, causing headaches to passengers and airlines alike, but carriers are seen suffering little financially from the storm.

AP

US Airways jet on the tarmac surrounded by blowing snow, Philadelphia International Airport.

According to the FAA, more than six thousand flights were canceled, leaving thousands more passengers stranded and displaced all over the country, and in some cases, the world.

At least 31 international flights landed at New York's JFK airport between Monday and Wednesday, but unloading the plane was a whole different story. A Cathay Pacific flight from Bangkok sat idle on the tarmac for twelve hours. Other international carriers including British Airways and Air Mexico landed flights that waited eight hours or more for a gate to open. International carriers don't face the same penalties and fines levied by the Department of Transportation that domestic carriers do.

While it would seem those carriers and passengers suffered the worst, Seth Kaplan, managing director at Airline Weekly, says that's not necessarily true.

"While these international passengers had to wait for more than an uncomfortable amount of time on the tarmac, they did land at their destination, while most domestic flights never took off...if you leave people stranded out on an airplane now [in the U.S], that can cost millions of dollars just for one incident like that. And so airlines have become more likely to just say, you know what, let's avoid that possibility, let's cancel any that might end up in that situation," Kaplan said.

That doesn't mean the domestic carriers didn't suffer. The hardest hit are those with hubs in the cities slammed by the snowstorm, mainly JetBlue , Continental , Delta and American. However, many analysts believe that compared with other weather events, the financial effect of this blizzard looks relatively small.

Remember the Icelandic volcano that spread ash across the Northern Hemisphere? According to International Air Transport Association, it cost the industry $1.7 billion. Mike Miller, vice president of strategy at the American Aviation Institute, believes this snowstorm could cost $100 million or more, but was spread across the carriers so the financial hit for each airline wasn't big.

The timing of the storm also helped minimize the financial effect. Bob Mann, president of Airline Industry Analysis, says that "tickets sold for the holidays are largely restricted and non-refundable, so revenue revenue is preserved...and when planes don't fly, fuel isn't burned, and employees that don't work...don't get paid."

Mann also said that if the blizzard occured at a time when more business passengers were scheduled to fly, the revenue loss would have been bigger. Business travelers may have chosen not to fly if the reason for the flight was a meeting or work event. Those travelers likely would have cashed in their more expensive, refundable tickets and the carriers would have lost that revenue.

Miller says the bigger costs could be carriers losing some of their best passengers, or possibly, a bigger long-term financial impact if this snowstorm prompts more government regulation.

Most passengers have made it to their intended destinations by now, though some of the airlines CNBC spoke to said there were a small minority of passengers that are still waiting to fly sometime this weekend.

Continental is now running on a normal schedule with full flights. United flew about a dozen extra flights to get passengers to their destinations, but only offered 400 cancelations, a relatively small number compared to JetBlue's nearly 1400 canceled flights.

And while most passengers may have made it to their final destinations, many bags still have not—but don't expect a refund for that bag fee.